MONTHLY: China's thermal coal may gain steam on tighter supply, winter demand

China's spot market for thermal coal is entering October on a firmer tone, as tightening supply coincides with a seasonal recovery in demand. This follows a volatile September, when a spurt of restocking by utilities drove a short-lived price rally, Mysteel noted in its latest monthly report.

Throughout September, thermal coal prices at northern transfer ports fluctuated widely. Mysteel had assessed the benchmark 5,500 kcal per kg NAR thermal coal at RMB 694 per tonne (USD 97.4 per tonne) FOB northern ports with VAT on September 1, but by September 12 cooler temperatures and rising hydropower output had curbed coal consumption at utilities, causing prices to gradually decline to RMB 681 per tonne. Prices then rebounded to RMB 709 per tonne on September 24 amid restocking demand ahead of the National Day holiday (October 1-8), before easing again to RMB 705 per tonne on September 30 as the buying came to a standstill.

In October, supplies to northern ports are likely to tighten, as autumn maintenance on the Daqin railway – a key coal transport artery linking Datong in North China's Shanxi province with Qinhuangdao port in Hebei – began on October 7. The overhaul, lasting 20 days, had already reduced daily shipments to 1 million tonnes on the first day, down from an average of 1.17 million tonnes per day during September 30-October 6. Historically, Daqin's shipments tend to fall to around 1 million tonnes per day during such maintenance periods.